Life insurance: had no idea it was so complicated!

dgerrard

I'm really at my wits end with arranging life insurance for my wife and I!
Getting my mortgage arranged took maybe two hours in total from research to purchase, bish bash bosh.
I've spent over four hours with my financial adviser on the phone, and double that researching, to get the best outcome for my wife and I.
Would love to get some advice on this:
I'm 36, my wife's 30.
I have death in service through work, £240k.  I also have crit illness through work, £45000 per annum until 65.
Wife has a £25k lump sum for crit illness, no death in service.
We have a mortgage of £319k.
First, FA said go with joint life + CI decreasing cover for £319k for you and your wife.  £114 a month.
I was skeptical, as this took into account none of my work benefit.  He said "they never do, don't rely on that at all, your work will never pay that.  Go with the joint decreasing".
Nearly did, but glad I did a bit of research:

• From the way he said it, I thought decreasing cover meant my premiums would decrease each month as the mortgage got paid off more.  Not that the payout would decrease but my premiums would stay the same.
• He said joint would be cheaper, but didn't mention that if we got joint, and I got sick:  we'd get the £319k (or whatever left on decreasing) to pay off the house.  But then if my wife died the next month in a freak accident:  then we have no additional cover.  If we have the individual cover, then there would be payment in both cases.

I asked for a new quote, bearing in mind my work benefits and what I'd want to be covered for.  I said, two individual plans, covering £200k each for both life and CI.
The quote has come out basically the same, but he seems reluctant to go ahead with it.
Am I missing something here?  Any advice, based on my current benefit and our situation?
Thank you!

SonOf

Would love to get some advice on this:
Is your adviser not giving you advice?

I have death in service through work, £240k.
Which is largely designed to compensate your spouse for lost income for a few years and reduced pension entitlement. 

First, FA said go with joint life + CI decreasing cover for £319k for you and your wife.  
That sounds reasonable as it is usual to ignore death in service for debt coverage.

He said "they never do, don't rely on that at all, your work will never pay that.  Go with the joint decreasing".
That bit is BS.   I have been doing this for over 25 years and they pay out as routine.

He said joint would be cheaper, but didn't mention that if we got joint, and I got sick:  we'd get the £319k (or whatever left on decreasing) to pay off the house.  But then if my wife died the next month in a freak accident:  then we have no additional cover.  If we have the individual cover, then there would be payment in both cases.
You clearly have a decreasing term assurance need and joint makes sense for the vast majority.  However, its likely your wife (and possibly you) need additional "family" protection as well.  So, another policy or segment may be required to cover that.

I asked for a new quote, bearing in mind my work benefits and what I'd want to be covered for.  I said, two individual plans, covering £200k each for both life and CI.
That sounds a bit like picking random figures out of the air rather than doing a proper needs analysis.   Your death in service/CI can be used towards the family protection bit.     

The quote has come out basically the same, but he seems reluctant to go ahead with it.  
I can understand that.  It fails to meet the needs.  e.g. It doesnt cover the mortgage need and still leaves at least one of you financially worse off in the event of death.

We dont have the facts to give advice and the board rules do not allow us to give advice in regulated areas.  However, the generally expected outcome (but there are exceptions based on circumstances) would be to have a decreasing term assurance for the mortgage and a level term assurance for any shortfall in the family protection.   It may require multiple level term assurances to cover the inbalance between you and your wife on your existing provision and your existing pensions (yes, pensions should be taken into account too when looking at your life assurance needs).

sal_III

Things to consider:
- You don't know if you are going to stay on this job or if your employer will continue providing these benefits - so I would treat them as "bonus", not as a main cover.

- Life insurance is not mandatory, nor does the cover needs to match your mortgage. Only you can calculate how much the surviving party and/or dependants would need to continue their normal lives from a financial perspective. Everyone circumstances re unique so there is no "golden rule".

- Joint policies are always cancelled if one of you dies, but only cost about 80% of 2 individual policies - IMHO false economy, me and my wife have separate policies.

- You can always get an additional policy in the future if your circumstances change (like loss of work benefits for example). You can have multiple life insurance policies by multiple providers.

- For Critical illness personally I look at the side benefits and number of conditions covered, over pure cost in terms of premiums unlike life insurance where there is little difference between providers for CIC there is quite the range.

- As you grow old the life insurance will get more expensive. It's worth considering one now and also the term. You don't want to take a 25 years policy at 30 that would live you with no cover at 55 when a new policy will be considerably more expensive than if you take a 30+ years today.

Good Luck  

Weighty1

The FCA would expect an adviser to recommend the most cost effective solution to fit a particular need.  For example, a mortgage can only be repaid once so because a joint plan will be cheaper than 2 single life plans then you would expect a joint plan to be recommended as there's no financial need present after the mortgage has been repaid.

If you claimed and the mortgage was repaid and then your wife died a week later what would you need the money for? 

If there are other needs to consider then you need cover that suits that need and a decreasing term assurance plan it not generally recommended for family protection as it's designed to repay a mortgage.
I don't think you do have critical illness through work as critical illness cover rarely pays an income.  It's more likely to be a group income protection scheme and from the looks of it pays 75% of your gross income, however, that 75% will still be subject to tax and national insurance deductions.  This would mean you'd have a fairly hefty reduction in household income if you became long term critically ill so having the mortgage repaid in full would enable you to maintain your lifestyle much more readily than only having £200,000 which would still leave a mortgage to service for a good few years until the mortgage balance dropped below that amount.

I would also recommend my clients disregard death in service.  This is not contractually guaranteed, even in civil service/public roles DIS cover has reduced over the years so there's a bit of folly to rely on something which you are not in control of.

csgohan4

I wouldn't trust employer death in service, some have conditions and some not enough coverage, get cover you want for peace of mind and which pays out 100%

Jaydr1270

I really hope someone can help me or point me in the right direction.

My parents took out a life insurance many years ago. 'I have tried to contact axa/sun life to get the details as to when they signed up but have to wait for my mother to be here before they can talk me although I am the next of kin!''

The monthly payments has always been £22 a month per person. When I found out it was too late as my dad had already signed up. Subsequently my father passed away in Jan 2014 and they paid up nearly £1500. which at that time worked out a lot less than what he paid in!!!

Six years on and I am quite angry that my mother cannot either reduce her payment nor get out of it...she would definitely have made payments of a lot more than what they will pay out upon her death.

She is a 69 year  pensioner and that £22 a month could really help her if she didn't have that to pay!! My father was a bit silly when he took that on as he saw it on an advert and rang up immediately without checking with anyone and then he got caught out and now my mother is stuck.

Whenever I have rung up to ask if she can reduce her payment or stop it its always been no. There are no email addresses to customer services or anything just a phone number to ring or a physical address to write to. Very old school or perhaps to fend people off!!! So there are no records as letters can get lost and phone records can be deleted!!!
Any feedback will be welcomed.thank you.

SonOf

I really hope someone can help me or point me in the right direction.
Can you post on your own thread please and not this one.   What you are doing is known as "thread hijacking" and is considered bad form.  The original poster asked questions and is getting responses.  By you hijacking the thread with your own unrelated issues, you could take the thread off subject and prevent the original poster getting the help they have asked for as their issues get lost as yours take over.   Copy and paste your post into a new thread and we can help you there.

csgohan4

SonOf said:

I really hope someone can help me or point me in the right direction.
Can you post on your own thread please and not this one.   What you are doing is known as "thread hijacking" and is considered bad form.  The original poster asked questions and is getting responses.  By you hijacking the thread with your own unrelated issues, you could take the thread off subject and prevent the original poster getting the help they have asked for as their issues get lost as yours take over.   Copy and paste your post into a new thread and we can help you there.

Agreed, so I will not post until this hijacking OP has done the correct thing

ThePants999

csgohan4 said:

I wouldn't trust employer death in service, some have conditions and some not enough coverage

What do you mean, not enough coverage? Coverage of what?
My death in service is a key part of our total insurance. It seems crazy to discount it.

csgohan4

ThePants999 said:

csgohan4 said:

I wouldn't trust employer death in service, some have conditions and some not enough coverage

What do you mean, not enough coverage? Coverage of what?
My death in service is a key part of our total insurance. It seems crazy to discount it.

Coverage in terms of how much money paying out. 
You need to make sure it is adequate in terms of maintaining your lifestyle and essentials such as mortgages etc

Some employer's death in service are not worth the paper their written on
https://www.ftadviser.com/pensions/2019/04/12/doctor-s-union-takes-ombudsman-to-court/

Hence why I have my own income protection and life insurance.
Also would your death in service pay if you were let go ?
Least if you got your own cover, it is only dependent on you paying the premiums and not related to your job security

Again personal preference, what works for you may not work for others

But you get what you pay for, you want cheap, you will get cheap cover

Weighty1

ThePants999 said:

csgohan4 said:

I wouldn't trust employer death in service, some have conditions and some not enough coverage

What do you mean, not enough coverage? Coverage of what?
My death in service is a key part of our total insurance. It seems crazy to discount it.

Imagine you fall long-term ill and get medically retired.  You then lose your DIS.

Seems crazy to incorporate it to me, especially since it's a free benefit so you're not paying double if you have your own personal cover which YOU have control over.